March Mexican Foreign Trade Policy in The New Millennium
March Mexican Foreign Trade Policy in The New Millennium
By
María-Cristina Rosas
MARCH 2002
By
María-Cristina Rosas*/
MARCH 2002
APEC STUDY CENTER
INSTITUTE OF DEVELOPING ECONOMIES
*/ Professor, Department of International Relations, Faculty of Social and Political Sciences, National
Autonomous University of Mexico (UNAM), (Email: [email protected]).
Table of contents
Charts ii
Graphics iii
Acronyms iv
Introduction vii
Annexes 90
Bibliography 117
Index 129
i
Charts
ii
Graphics
iii
Acronyms
G3 Group of Three
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GNI Gross National Income
GNP Gross National Product
GPS Generalized Preferential System
iv
I
v
T
WB World Bank
WTO World Trade Organization
Note: This document contains the introductory chapter of the report only. For
obtaining the whole report, please contact:
vi
Introduction
Mexico’s Foreign Trade Policy has experienced dramatic changes from the
middle 80’s to now. In that period, the country dismantled most of its obstacles
to international trade; embraced the General Agreement on Tariffs and Trade
(GATT) membership; signed free trade agreements with a substantial amount of
countries, including the United States and the European Union (EU); and
became a founding member of the World Trade Organization (WTO). At the
same time, Mexico became very active in regional fora such as the Asia-Pacific
Economic Cooperation (APEC) arrangement, the Organization for Economic
Cooperation and Development (OECD), the Bank of Economic Reconstruction
and Development (BERD), the Iberian American Summits (IAS), and the
Americas Summit (AS).
Mexico joined the GATT until 1986. Prior attempts to become a member were
dropped since, it was argued, the country would lose sovereignty and power
decision-making in dealing with the management of the economy. Since then,
the Mexican economy opened, making domestic decision-making more and
more exposed to the imperatives of the international environment. This decision
was nurtured by the economic difficulties faced by the country in the 80’s. The
international prices of its main export product, the oil, diminished dramatically,
having devastated consequences for a country whose most important source of
revenues was the selling of oil products abroad. Mexico was also heavely
1
indebted, and the international creditors were not willing to deliver to the country
neither to other developing nations fresh credits, worsening the situation. Also,
the recession of the United States economy had important effects in Mexico,
due to the strong dependence on the American market for Mexican products. All
those circumstances claimed for dramatic changes in the Mexican economy
and eventually a restructuring of Mexico’s Foreign Trade and Foreign
Investment legislations were considered as a condition to discuss a
restructuring of the foreign debt with creditors, and a more predictable
relationship (via free trade agreements) with its major trade partners.
The NAFTA negotiations took place at a time when skepticism on the faith of
multilateral trade negotiations under the GATT framework, was flourishing.
Many countries believed that the GATT structure was no longer the best to
negotiate issues like market access and national treatment. The rules of
procedure, including the consensus and the single undertaking provisions made
more difficult to reach an agreement among its more than 120 members,
particularly during the Uruguay Round of multilateral trade negotiations. By
1989 it was believed that member countries should explore alternatives to
multilateralism in dealing with market access, and regionalism, apparently,
became an option. Between 1989 and 1994, more than 30 new wave regional
economic cooperation and/or integration initiatives were developed, such as
NAFTA (1994), the South American Common Market (MERCOSUR, 1991),
APEC (1989), the Association of Caribbean States (ACS, 1994), the African
Economic Community (AEC, 1991), the Arab Maghreb Union (AMU, 1989), the
West African Economic and Monetary Union (UEMOA, 1994), the Common
Market for Eastern and Southern Africa (COMESA, 1993), the Southern African
Development Community (SADC, 1992), the Central American Integration
System (SICA, 1991), and the Central European Free Trade Area (CEFTA,
2
1992), among others. This is not to suggest that the only reason to sign free
trade, customs union and common market agreements was the stagnation of
the GATT Uruguay Round, since each country involved in the mentioned
initiatives may have had specific needs and requirements when it comes to the
market access of its trade partners. However, the fact that the multilateral
approach was not perceived as an option, certainly contributed to the
perception that regionalism was a desirable process.
For Mexico, a free trade agreement with its major trade partner was a follow-up
step after the country was able to become a member of GATT. Thus, when the
Uruguay Round experienced a major stagnation, Mexico actively pursued a
comprehensive trade arrangement with the United States. Even though
multilateralism was identified as an important forum for Mexican authorities, the
fact that more than three quarters of Mexico’s total international trade were
carried out with one country made the NAFTA negotiations extremely attractive
and important. At that time, the US Government had already signed bilateral
free trade agreements with Israel (1985) and Canada (1989). Being Mexico its
third major trade partner, the United States considered feasible a free trade deal,
specially because it already had one with its major trade partner, that is,
Canada.
For the NAFTA negotiations to succeed, President George Bush Senior needed
the Congress to authorized the so-called fast-track authority with which the
Executive branch would be allowed to negotiated trade arrangements. Once
ready, they would be submitted for the consideration of legislators, so that they
ratify either reject the agreement, without the possibility of making amendments
to it. In order to negotiate NAFTA, President Bush Senior was granted the fast-
track authority. Several studies suggest that in signing NAFTA, the United
States Government paved the way for additional negotiations within the GATT
framework, since most of GATT members were not happy to know that major
economic powers were sponsoring free trade, customs union and/or common
market agreements far from the multilateral environment. Some analysts also
suggest that despite the fact that NAFTA is a matter of concern with respect to
the multilateral negotiating environment, several provisions of the agreement
3
served as “model negotiations” to nurture the Uruguay Round multilateral
negotiations. In any case, the fast-track authority granted to President Bush
Senior to sign NAFTA was also the same authority so that the United States
signed the Uruguay Round agreements and became member of the new-born
WTO.
By the time WTO was created, the enthusiasm over regional economic
cooperation and/or integration agreements was considerably high. The new
wave mentioned above remained in place, i. e. no single regionalization
initiative born in the 1989-1994 period neither in previous times was dismantled,
putting the multilateral trading system in a difficult coexistence with initiatives
based on the GATT article XXIV provision on free trade, customs union and/or
common markets arrangements.
Mexico, in fact, pursued additional free trade negotiations with countries in three
continents, despite the coming into force of the Uruguay Round agreements.
Thus, from the time the Uruguay Round experienced a dramatic stagnation to
now, Mexico signed 10 free trade agreements, that is –an apart from NAFTA-:
with Bolivia, Chile, Costa Rica, the so-called Group of Three (G3, including
Mexico, Colombia and Venezuela), Nicaragua, the so-called North Triangle (NT,
including Mexico, El Salvador, Guatemala and Honduras), the European Union,
the European Free Trade Association (EFTA), and Israel. Currently, Mexico
explores the possibility of concluding free trade agreements with MERCOSUR
countries –even though in this particular case the crisis experienced by
Argentina and the traditional rivalry with Brazil may postpone the negotiating
procedure-, and Japan.
The existence of a net of free trade initiatives raises concerns not only in
dealing with the multilateral trading system but also among the free trade
arrangements themselves. Some studies suggest the risk of overlapping
between the agreements. Mexico, in fact, experienced it, when NAFTA came
into force and Brazil claimed that the Mexican Government had failed to comply
with the provisions stated at the Montevideo Treaty of the Latin American
Association of Integration (LAAI), created long before NAFTA was born. The
4
most important problem, however, is the possibility of a multiple-compromising
scheme, considered by several practitioners trade promiscuity where each
arrangement intends to make prevail its particular provisions and rules. That is
why it is claimed that the multilateral trading system should prevail in dealing
with market access issues.
In any case, it would be fair to recognize that Mexico has pursued unilateral,
bilateral, regional and multilateral approaches to promote its economic interests
in the world. Unilateral measures have been considered necessary, for instance,
to face unfair competition practices by countries like China, whose products,
due to controversial production mechanisms happen to be very inexpensive.
Mexico has unilaterally imposed anti-dumping and countervailing duties to
Chinese products. These measures will become more difficult to implement due
to the Chinese membership at WTO –and in fact, Mexico negotiated a six to
eight year protection mechanism depending on the economic sector involved, to
protect its economy against Chinese products by the time Beijing became a full
member. Mexico has also signed bilateral agreements, like the ones, already
mentioned, with Israel and the European Union. Regionalism is very much in
the Mexican agenda, since, as explained before, most of the free trade
agreements signed in the past decade have been concluded with Latin
American Countries, without forgetting the Mexican participation in the US-
sponsored initiative to create a Free Trade Area of the Americas (FTAA). And,
speaking about multilateralism, apart from being a founding member of WTO,
Mexico will be hosting, in 2003, the WTO Ministerial Meeting where a new
multilateral round of trade negotiations is expected to continue.
5
consumption, thus harming Mexican products traditionally sold in the American
market. Some analysts also emphasize the political consequences of
maintaining a strong relationship between two asymmetrical countries like
Mexico and the United States, by suggesting the most vulnerable country, in
this case Mexico, is exposed to the imperatives of a country that is dominant
both in economic and non-economic terms, raising concerns about a limited
sovereignty. However, Mexico has not succeeded in diversifying its economic
links to other parts of the world, thus suggesting the signing of several free
trade agreements is more a political decision with minor economic impacts on
Mexico’s foreign trade.
What is that Mexico should do to promote its economic interests in the world in
a better way? Is it the current path the right one? The way in which the
economy was opened from the middle 80’s to now has produced dramatic
transformations within Mexico. After being an essentially raw materials exporter,
today most of its export products are manufactures. As suggested before,
however, oil is still very important when it comes to the total revenues of the
country. Part of the explanation can be found in the amount of components
needed from abroad to produce manufactures in Mexico. Because the opening
of the economy was conducted too fast, local producers were not able to
compete against foreign products. Most of those companies collapsed, making
Mexican production very dependent upon components made abroad. Thus, if
Mexico intends to increase its exports, it is needed, in fact, to increase the
imports of foreign goods and services. Also, an analysis of Mexico’s trade
balance reveals the strong dependence on foreign food products to satisfy the
most basic consumption requirements of the Mexican society. Currently there is
a debate on the extend in which the fact that Mexico is not able to produce
enough food to feed its population constitutes a threat to the national security of
the country. This is just to say that free trade agreements are increasing trade
between Mexico and its partners, but free trade has also distorting effects that
Mexico has not been able to deal with, at the expense of its productive and
competitive capabilities. Thus, Mexico needs an industrial policy where the role
of free trade negotiations is clearly defined. At the same time, the debate on the
need of additional free trade, customs union and/or common market
6
agreements should be seen in face of the existing trade arrangements, the
overlapping between them, and the fulfillment or not of their goals. The
multilateral environment may be a good way to pursue trade negotiations by
countries like Mexico, capable of addressing specific issues of concern for other
developing and even developed countries, and also with the possibility of
working together with like-minded countries to succeed in the negotiating
process.
That does not solve, of course, the missing compatibility between the existing
free trade, customs union, and common market agreements and the multilateral
trading system. Yet, more than a hundred regional economic cooperation and/or
integration initiatives exist all over the world and they cannot be ignored.
Virtually any country in any part pf the world, is involved in such initiatives. The
logical approach would be the multilaterilization of regionalism. That could be
done by multilateralizing the existing free trade, customs union and common
market initiatives, as suggested by some members of APEC. The other option,
seems to be more complex an very difficult to implement: the creation of a
multilateral negotiation environment where the participants would be, instead of
States, free trade, customs union and common market areas. This proposal, in
particular, would be very difficult to implement in the NAFTA region, where its
members, particularly the United States, do not seem to share common
negotiation interests with Mexico and Canada vis-à-vis other partners, such as
the EU. That is why Mexico already signed a free trade agreement with the
European Community, whilst the United States established on December 15th,
1995, the Transatlantic Agenda. Canada, on the other side, has not been able
to negotiate a trade arrangement with the EU. This illustrates the difficulties in
developing a common purpose within a region with respect to other parts of the
world. Only a few regional initiatives have consolidated a common approach in
that respect, being an exceptional example the European Union itself.
In the following pages, these matters will be discussed through the analysis of
Mexico’s Foreign Trade Policy. To do that, the first chapter will deal with the
economic reform carried out by Mexico from the middle 80’s to now and its
implications for the foreign trade policy of the country. The second chapter will
7
discuss the characteristics of the foreign trade policy of Mexico, by emphasizing
the unilateral, bilateral, regional and multilateral approaches pursued by the
Mexican Government to promote the economic interests of the country in the
world. From chapters three to six, four case studies of free trade negotiations
conducted by Mexico, will be examined. The first one is the NAFTA agreement,
which is the most important for economic and non-economic reasons,
considering that it involves the participation of Mexico’s major trade partner. The
next analysis focuses on the Mexico-European Union agreement, which is the
most comprehensive negotiation conducted, so far, by the Mexican Government.
Following in the analysis there is the Mexico-Costa Rica Free Trade Agreement,
and, finally, the Mexico-Israel Free Trade Agreement. These agreements were
not chosen by accident. Of the ten free trade agreements concluded by Mexico
in the past decade, these are either important and/or representative of Mexico’s
Foreign Trade Policy. NAFTA, for instance, is a mandatory reference, since it
paved the way for successive free trade negotiations. The agreement with the
European Union includes provisions that set economic and non-economic
standards for future trade negotiations conducted by Brussels. The agreement
with Costa Rica illustrates the way in which Mexico is promoting its economic
agenda in Latin America. Finally, the agreement with Israel, though hard to
justify in commercial terms, given the minimum importance of Israel in Mexico’s
total foreign trade, includes and excludes several economic sectors, a situation
which occurs in sharp contrast to other agreements signed by Mexico and Israel
with other partners.
This study finishes with concluding remarks on the debate over the challenges
that Mexico’s Foreign Trade Policy is facing in the years to come, the
desirability of additional free trade, customs union and/or common market
negotiations and the inevitable questions: what happens once trade
liberalization has been achieved through the agreements mentioned above –
since all of them have an average lasting time of 5 to 15 years? Will bilateral
relations evolve to a more comprehensive and inter-dependent relationship, say,
from a free trade area to a customs union - i. e. a common external tariff, or
from there to a common market? What are the chances for Mexico to redefine
its foreign trade strategy by multilateralizing the existing regional and bilateral
8
trade arrangements? Is Mexico willing to become a leader at the WTO
environment? Is the current Mexican Government in favor of designing a
comprehensive industrial policy for the next 20 years in which the role of
multilateral, regional and bilateral trade negotiations is clearly defined?
Before proceeding to the analysis of the issues mentioned above, I would like to
take this opportunity to thank my dear colleague and friend Professor Mónica
González for sharing her views on several matters discussed bellow, and also
for her valuable time and work in organizing the index at the end of this
research.
9
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List of Publications from the IDE APEC Study Center
FY 1995/96
No.1 Hiroki Kawai and Iwao Tanaka, “Measuring the Cost of Protection in Japan”, 1990.
No.2 Fumio Yoshino, “Trade Impediments of Agricultural Products and Food”.
No.3 Haruko Yamashita, “Factors Affecting Domestic Price Differentials in the Japanese Fisheries
and Marine Products”.
No.4 Kunihiro Ohishi, “Factors Affecting Domestic Price Differentials in the Petroleum Products”.
No.5 Hideki Ishikawa, “Factors Affecting Domestic Price Differentials in the Japanese Electric and
Electronic Machinery Products”.
No.6 Akiko Hirano, “Legal Aspects of the Institutionalization of APEC”.
No.7 Tatsushi Ogita, “The APEC Policy-Making Process in Japan”.
No.8 Jiro Okamoto, “An Approach towards Australia's Foreign Economic Policy Making Process”.
FY 1996/97
1. Report
Chapter I General Perspective on the Economic And Technology Cooperation of APEC (by
Keiji Omura)
Chapter II Trade Flow and Foreign Direct Investment in APEC Region (by Satoru Okuda)
Chapter III Constant-Market Share Analysis and Open Regionalism: A Study Suggestion (by
Hiroya Ichikawa)
Chapter IV Development and Stability of the Asia-Pacific Regional Market: How to Stabilize
the Development Path of the East-Asian Market by Establishing a Framework for
Better Risk Management (by Toshihiko Kinoshita)
Chapter V Human Development in the Case of Small and Medium Sized Enterprises (by
Tomohiro Uchida)
Chapter VI APEC Cooperation for Adjustment toward Emerging Problems (by Masatake
Wada)
Chapter VII Japan's ODA and APEC (by Takeshi Mori)
24
No.13 Masanao Terashima, “Trade and Investment Barriers, and Domestic-Foreign Price
Differentials in Transport Services”.
No.14 Schunichi Hiraki, “Impediments in Construction and Engineering Services”.
No.15 Haruko Yamashita, “Trade Impediments and Domestic Price Differentials in the Japanese
Telecommunications Sector”.
No.16 Kazuhiko Yokota, “Impediments to International Service Transactions in the Health-related
and Social Services Sector”.
No.17 Shujiro Urata and Hiroki Kawai, “The Cost of Regulation in the Japanese Service Industries”.
No.18 Marina Fe B. Durano, “Barriers to Cross-Border Provision of Services within the APEC: with
a Focus on the Movement of Persons”.
No.19 Kahlil Rowter, “Training as a Vehicle for Enhanced Growth: A Study of Human Resource
Development Needs for Enhanced Investment and Cooperation among APEC Members”.
No.20 Li Kun Wang , “The Effect and Strategy of Trade Liberalization for China”.
No.21 Zhao Jiang Lin, “Openness of China’s Manufacturing Sectors and Its APEC Policy”.
Center for APEC Studies, Nankai University, Economic Policy in APEC: The Case of China Policy.
Institute of Economics and Social Research, Faculty of Economics, University of Indonesia, Economic
Policy in APEC: The Case of Indonesia.
Philippine Institute for Development Studies, Economic Policy in APEC: The Case of the Philippines.
Faculty of Economics, Chulalongkorn University, Economic Policy in APEC: The Case of Thailand.
FY 1997/98
1. Report
APEC/IAP and Negotiations for the Accession to the WTO in 1997 (by
Daisuke Takoh)
25
3. Reports of Commissioned Studies
Urban Ecosystem Management, Institute for Environment and Development (LESTARI), Universiti
Kebangsaan Malaysia, Urbanization and Environment in Malaysia: Managing the Impact.
Tsai She Hsien, Taiwan Research Institute, A Study in the technological Development of Taiwan’s
Enterprise and Technology Transfer with Direct Investment. (in Japanese).
FY 1998/99
1. Reports
Chapter I “Potential” APEC Sub-regions: Current Status and Future (by Satoru Okuda)
Chapter II The AFTA-CER Linkage Dialogue: An Endeavour for Closer Relations between
SRTAs within APEC (by Jiro Okamoto)
Chapter III Vietnam in APEC: Changes in Trade Patterns after the Open Door Policy (by
Mai Fujita)
Chapter IV Development Policies for Small and Medium Enterprises in APEC: In the Case
of the Philippines (by Mayumi Fukumoto)
Chapter V Capital Account Liberalization in Emerging Markets: Lessons from the Asian
Currency Crisis (by Shunji Karikomi)
Chapter VI Korea’s New Accounting Standards and Its Impact on APEC (by Shiro
Takahashi and Satoru Okuda)
Ratana Eiamkanitchat, “The Role of Small and Medium Supporting Industries in Japan and Thailand”.
Rajah Rasiah, IKMAS, UKM and Faculty of Economics and Business, UNIMAS, State Support and
Machine Tool Subcontracting Links in Malaysia : Microelectronics and Passenger Car
Assemblies.
Kitti Limskul, Faculty of Economics, Chulalongkorn University, Future Prospects of Selected
Supporting Industries in Thailand.
FY 1999/2000
1. Report
26
Chapter I Industrial Linkage and Direct Investment in APEC (by Satoru Okuda)
Chapter II Foreign Direct Investment, Trade, and Vietnam’s Interdependence in the APEC
Region (by Mai Fujita)
Chapter III Technical Assistance to Japanese Affiliates: The Case of the Autoparts Industry
in Thailand (by Yoshi Takahashi)
Chapter IV Russia’s Participation in APEC and Economic Development in the Far East (by
Mayumi Fukumoto)
Chapter V Macroeconomic Impacts in APEC Region: Measurement by APEC Link Model
(by Jinichi Uemura)
No. 1 Jiro Okamoto, “The Political Process of APEC Early Voluntary Sectoral Liberalisation: Setting
the Research Agenda”.
No. 2 Akiko Yanai, “APEC and the WTO: Seeking Opportunities for Cooperation”.
No. 3 Fumio Nagai, “The APEC EVSL Initiative and the Policy Making Process in Thailand”.
No. 4 Tatsushi Ogita, “Japan’s Policy Making in the APEC EVSL Consultations: Its Actors, Process
and Interpretations”.
No. 5 Yutaka Onishi, “Politics by Mass Media?: Changes in the Korean Policy toward APEC Early
Voluntary Sectoral Liberalization”.
No. 6 Satoshi Oyane, “America’s Non-“Two-Level Game” at the APEC EVSL Initiative: Structural
Change in Trade Politics”.
Michael Wesley, School of Political Science, University of New South Wales, The Politics of Early
Voluntary Sectoral Liberalisation in Australia.
Hanafi Sofyan, A. Syafi’i, Yasmi Adriansyah and Lynda Kurnia Wardhani, Institute for International
Finance and Commodities (Jakarta), The Policy Making Consultations of APEC Early
Voluntary Sectoral Liberalization: The Case of Indonesia.
FY 2000/01
1. Report
Chapter I Impact of Economic and Technical Cooperation on Northeast Asian Countries (by
Mayumi Fukumoto)
Chapter II Linking SRTA and ECOTECH—A Consideration Based on Japan-Korea FTA
(by Satoru D. Okuda)
Chapter III Macroeconomic Impacts under FTA Configuration in the APEC Region (by
Jinichi Uemura)
Chapter IV Liberalization of Trade in Services in APEC: Assessment of IAP and the GATS
Commitments (by Mikiko Yogo)
Chapter V Regional Trade Arrangement and Strategies of Multinationals: Implications of
AFTA for Economic Integration (by Mai Fujita)
Chapter VI Expert Dispatch Program for Private Enterprises –The Case of JODC Experts in
the Thai Manufacturing Sector– (by Yoshi Takahashi)
No.1 Jiro Okamoto, “The AFTA-CER Linkage Dialogue Revisited: Its Recent Development and
Implications”.
No.2 Akiko Yanai, “Reciprocity in Trade Liberalization”.
No.3 Fumio Nagai, “Thailand’s Attitude toward Trade Liberalization: In the Context of the ASEAN
Free Trade Area (AFTA) ”.
No.4 Tatsushi Ogita, “On Principles of APEC”.
27
No.5 Satoshi Oyane, “‘Plurilateralism’ of the United States and its APEC Policies”.
No.6 Hanafi Sofyan, “Promoting Financial Cooperation within the ASEAN+3”.
Yoo Soo Hong, Korea Institute for International Economic Policy (KIEP), Internet Business
Cooperation in Northeast Asia and APEC.
Vladimir I. Ivanov and Hirofumi Arai, Economic Research Institute for Northeast Asia (ERINA),
Multilateral Cooperation in Northeast Asia and APEC.
http://www.ide.go.jp/English/Apec/Publish/index.html
28
APEC STUDY CENTER
INSTITUTE OF DEVELOPING ECONOMIES, JETRO
March 2002
3-2-2 Wakaba, Mihama-ku, Chiba-shi
Chiba 261-8545, JAPAN
Web Site: http://www.ide.go.jp
ISBN 4-258-59009-6